European stocks close

European stocks climbed, rebounding from their biggest decline in a month, as investors assessed the impact of a partial shutdown of the U.S. government.

The Stoxx Europe 600 Index added 0.8 percent to 312.86 at the close of trading, its biggest rally in three weeks, after a report showed that manufacturing activity in the euro area expanded for a third month in September. The equity benchmark fell by the most since Aug. 30 yesterday as U.S. politicians failed to agree on a compromise budget and Silvio Berlusconi pulled his ministers out of Italy’s coalition government.

U.S. lawmakers in Washington missed a midnight deadline to reach a compromise to continue funding the government. The shutdown will put as many as 800,000 federal employees out of work today, closing national parks and halting some government services. The Democrat-controlled Senate earlier voted 54-46 against a funding bill from the Republican-controlled House of Representatives because it made major changes to President Barack Obama’s health-care legislation.

The parties had no immediate plans for further negotiations. Some lawmakers expressed concern that the shutdown could lead to a deadlock over the need to raise the nation’s debt limit to avoid a default. The U.S. will run out of money to pay all of its bills at some point between Oct. 22 and Oct. 31 unless Congress increases the federal government’s borrowing authority, according to the Congressional Budget Office.

A report from Markit Economics showed that its euro-zone factory index fell to 51.1 in September, matching the preliminary estimate and the median forecast of economists. Readings greater than 50 mean that manufacturing activity increased.

National benchmark indexes advanced in every western-European market except for Britain. Germany’s DAX added 1.1 percent, while France’s CAC 40 Index increased 1.3 percent. The U.K.’s FTSE 100 slipped less than 0.1 percent.

Vestas jumped 6.8 percent to 148.50 kroner. Bank of America raised its price estimate to 180 kroner from 150 kroner, predicting that the company will pay off almost all its debt by 2015, earlier than the consensus forecast.

Wolseley Plc added 3.1 percent to 3,296 pence, its largest gain in more than five weeks. The world’s biggest distributor of plumbing and heating products said so-called trading profit in the 12 months through July climbed to 725 million pounds ($1.2 billion) from 665 million pounds a year earlier. Analysts had predicted earnings of 704 million pounds, according to the average of 20 estimates compiled by the company. Wolseley proposed a special dividend payout of 300 million pounds.

Unilever slipped 2.8 percent to 27.94 euro after saying sales growth slowed as trading in emerging markets deteriorated at a faster rate. Underlying group sales for the three months will rise 3 percent to 3.5 percent, the maker of Lipton tea and Dove soap said late yesterday in a statement. That compares with 5 percent growth in both the first half and second quarter.